Euro, Y'all

Euros and Confederate CurrencyThe headlines make it impossible to forget my prediction several years back to a friend at the University of Vienna that as the restrictions and regulations of the European Union grew more numerous and burdensome, he would come to a much fuller understanding of where southern secessionists were coming from in 1861.

I have to say that I am not particularly surprised by the current state of affairs in the Euro Zone, which seemed a very iffy if not downright wishful venture from the get-go because if it was to succeed over the long haul, all of Europe would have to be forged into what would effectively be a single, centrally governed nation.

Forget huge differences in languages and cultures, centuries of nationalism and warfare, and long-nurtured resentments appertaining thereto. (Don’t let anybody fool you into thinking that southerners who still harbor lingering resentments engendered by “the Recent Unpleasantness” are all that peculiar. Compared to the French, Italians, Irish, etc., our “Fergit Hell!” folks are veritable Johnny-Rebs-come lately in the art of bearing a grudge.) These historical impediments to E pluribus unum in Europe were compounded by here-and-now disparities in economic productivity as well as notable variations in attitudes toward work and the social obligations of government.

In case you forgot, despite the shared experience of fighting for their independence, it wasn’t exactly a piece of cake to turn thirteen former British colonies into a nation committed to common interests and ideals. If, however, these new states had but a short history of cooperation to build upon, they at least had no long history of going it alone or going up against each other in battle to overcome. Moreover, though diverse in origins, attitudes and cultural traits, the population did at least generally share a common language.

Although the institution of slavery loomed problematic early on, its growing divisiveness was further exacerbated by accelerating North-South economic divergence, which only grew more dramatic as the South’s departure from the union paved the way for the consolidation of a modern capitalist state in the North. Thus, upon their return, the southern states, constituting the nation’s least developed region, were all but compelled to play catch-up by trying to recruit capital from the more economically advanced states of the North. They pursued this strategy by urging northern investors to come on down and get themselves to exploiting not only the South’s abundant natural resources, but its huge surplus of labor desperate for work at whatever wages and on whatever terms might be offered.

Meanwhile, millions of southerners would ultimately seek to better themselves by migrating to states outside the region where economic opportunities were far superior to those back home. These southern out-migrants faced some challenging adjustments, but despite complaints about their accents, learning a completely new language and adapting to a truly “foreign” culture were not among them. The same held true in the last quarter of the twentieth century as the needle of opportunity compass began to swing southward, especially after Yankee influxers finally realized that none of their new neighbors really cared much about how things had been done in Ohio.

We hear frequently these days that adopting a common currency was literally disastrous for Greece, Spain, and Italy, which are roughly Europe’s economically equivalent “South,” because these nations had theretofore been able to rejuvenate their economies in times of recession without demanding greater productivity of employers and workers or tempering their social generosity with a dash of fiscal discipline, but by simply devaluing their currency in order stimulate international demand for their goods and services.

What’s the problem? Crank out several million more lire and “Divertiamo!” ( Loosely translated, “Let’s Party!”) Curiously, the states of the U. S. South sought to achieve the same thing intra-nationally by largely the opposite strategy. That is, they maintained cost advantages relative to states outside the region by keeping government small and extremely frugal and taxes comparatively low while instituting all manner of legal strictures, especially right-to-work laws and minimal Workmen’s Compensation requirements, all designed to ensure cheaper labor and living costs and greater returns on business and industrial investments.

With the New Deal and the emergence of an altogether unacknowledged American welfare state, southerners in Congress quickly parlayed their seniority and political savvy into a prime place for their constituents at the government trough, where they have dined fairly sumptuously ever since. Not surprisingly this arrangement has persisted to the great dismay of representatives of traditionally more prosperous northern states who object to seeing their constituents’ tax dollars being funneled south to supplement the niggardly expenditures of state and local governments in areas such as education, public health, and public welfare.

Frankly, it’s not that hard to envision that similar long-term scenario (which has already been operative for some time along similar North-South lines within Italy) playing out in the Euro Zone if the more cuddlesome but less materially productive and entitlement-addicted populations of Greece, Spain, Italy, and the like are forced by Germany, Austria, and the other economically stronger EU nations to choke down a big and bitter austerity pill as a condition of any bailout.

To make matters worse, just as the stream of better-educated young southerners headed north once robbed the impoverished South of desperately needed human capital, the EU’s straggler nations are now suffering the proverbial “brain drain” as their best and brightest book up for Germany. As one writer notes:
“The number of Spaniards relocating to Germany in the first half of last year shot up by 49%, or 2,400 more people, compared with the same period in 2010, according to the most recent statistics available. For Greeks, whose ravaged economy is caught in a steep downward spiral, the increase was even greater, a whopping 84%.”

Ironically, as our correspondent observes, this international transfer of human potential is “an excellent demonstration of the EU [finally] doing exactly what it was supposed to do: break down trade barriers across the continent and promote economic integration by allowing citizens to live and work where they choose.”

Part of the problem here, as it was historically for the American South, is simply that talented and better-trained people always have more choices as to where they “live and work.” In this case, of course, the more irrelevant national boundaries become, the lower the likelihood that their choices will be limited either by bureaucratic impediments or feelings of attachment or obligation to a specific country or place where they might be needed most.

I am struck by how many Americans think the EU crisis is actually a good thing for us. I recently overheard a lengthy conversation between a couple of twenty-something Yalies, both of whom agreed exultantly that the recent decline of the euro against the dollar was really terrific for them because both were planning on spending a couple of weeks in France this summer. Although I knew that Americans who stay home also stand to benefit from weaker euro’s potential to bring down oil prices, just a few hours earlier I had read a Wall Street Journal piece about the role of the tumbling euro in reducing European demand for Chinese products.

his naturally got me to thinking about potentially similar consequences for the U.S. economy, some of which might in fact ultimately bode ill for the two young up-and-comers seated beside me at the bar. Sure enough, I quickly encountered a Wall Street guru’s prediction that if the euro continued to tumble, the Dow would likely suffer a 10 to 15 percent drop as well because it was “economically or mathematically impossible for any large economy such as the USA’s which represents 23 percent of the global economy to grow steadily while its currency is also steadily appreciating against the currency of an economy which is even larger than its, such as the European Union which represents 25 percent of the world’s economy,” and one might add, also accounts for some 22 percent of U.S. sales abroad.

American companies reportedly have more than $2 trillion invested in factories and other facilities in Europe, and firms like Ford and General Motors are definitely feeling the pinch of Europe’s tightened pocketbook. The French grocery giant Carrefour has already cut its losses by dumping its stores in Greece and the banking group Credit Agricole has snatched its Greek assets back to the sheltering bosom of Mother France. If this god-awful mess mushrooms into a full-scale crisis of confidence among the banks over there, don’t be thinking for a second that a few thousand miles of ocean will necessarily keep us from feeling the effects over here.

Any parent who has reminded his offspring of his earlier warning about eating too many hot dogs at the picnic while driving the same offspring to the emergency room in the middle of the night can tell you that the price of being proven right can sometimes make you wish you had been wrong. In today’s tightly interconnected global economy, some of the costs of the EU crisis for us might be indirect, but they are nonetheless very real, real enough in fact to make any sense of satisfaction derived from having predicted this outcome ring fairly hollow.

So, rest easy, my Austrian friend, there’ll be no smug “I Told You So!” from me, at least not until the Confederate dollar starts to look good against the euro.

Composite photo created for - base image licensed by from; confederate currency and coin image from Wikimedia Commons and used with creative commons license.
Jim Cobb

Jim Cobb

Jim Cobb teaches history at the University of Georgia, where he is B. Phinizy Spalding Distinguished Professor in the History of the American South. His most recent book is the South and America Since World War II (Oxford University Press, 2010) He has been known to blog at